“Trade what you see; not what you think.” – The Old Fool,
Richard McCranie, trader extraordinaire.
“The big money is not in the buying and selling. But in
the waiting.” - Charlie Munger, Vice Chairman, Berkshire Hathaway
“Bubbles tend to topple under their own weight. Everybody
is in. The last short has covered. The last buyer has bought (or bought massive
amounts of weekly calls). The decline starts and the psychology shifts from
greed to complacency to worry to panic. Our working hypothesis, which might be
disproven, is that September 2, 2020 was the top and the bubble has already
popped.” - David Einhorn, Greenlight hedge fund.
ONE FOR THE AGES – Part 2. (Felder Report)
“Total US call option volume.
Biggest bubble of all time. Enjoy!
...What is most notable about this mind-boggling stat,
however, is the fact that it is being driven by small, retail traders to a
greater extent than ever before...’A pin lies in wait
for every bubble. And when the two eventually meet, a new wave of investors
learns some very old lessons: speculation is most dangerous when it looks
easiest.’ -Warren Buffett.” Commentary at...
https://thefelderreport.com/2020/12/09/one-for-the-ages-part-deux/
FOSBACK
ABSOLUTE BREADTH RATIO SAYS THIS IS NOT A TOP (McClellan Financial Publications)
“Right now, this indicator is still up pretty high, and that says the market is NOT likely to be at an important top just yet. The market can of course do whatever it wants to do, but for now the message is that this is not an important price top.”
Charts and commentary at...
As I have been saying for some time, the Fosback High/Low
Logic Indicator is bullish, too. Still, we have seen other indicators
suggesting we are near, or at a top so it is hard to get bullish until we see a
reset of the markets.
TRUMP ELECTORAL FRAUD CASES AN ABSUDITY (Daily Mail)
“'The legal theory put forward by his legal team and by
the president is an absurdity,' Christie told ABC's 'This Week' on Sunday
morning.
The Republican former governor of New Jersey was
specifically referencing the recent case brought to the Supreme Court by Texas,
attempting to police how other states run their election in an effort to
overturn Joe Biden's victory...The reason why the Supreme Court didn't take it
is because it's an absurd idea to think that any state or any number of states,
no matter how good they are, can challenge another state's right to run the
election as they see fit,' Christie said. He added: 'And, also, there's no
evidence.'” Story at...
CORONAVIRUS (NTSM)
Here’s the latest from the COVID19 Johns Hopkins website as
of 10:30pm Monday, however I averaged numbers for Sunday and Monday. US total
case numbers are on the left axis; daily numbers are on the right side of the
graph with the 10-dMA of daily numbers in Green.
MARKET REPORT / ANALYSIS
-Monday the S&P 500
dropped about 0.4% to 3647.
-VIX rose about 6% to 24.72.
-The yield on the 10-year
Treasury slipped to 0.890%.
Monday’s chart is ugly!!!! Why? Is it COVID-buy-the-rumor,
sell-the-news; more stimulus delays; or just technical market issues? We don’t
know and we really don’t care. The financial press always has a reason; they
are rarely correct.
The Bollinger Band Squeeze is still in effect. We see a
few other important indicators giving top-warnings, so the breakout is likely
to be down. Breadth is lagging the
S&P 500 by an amount that frequently signals a top and the Index is
stretched ahead of its 200-day moving average when sentiment is added to the
equation.
A couple more bear signs popped up: the McClellan Oscillator
(a breadth indicator) dropped into negative territory; my MACD of Breadth is
very close to a bearish crossover; my Money Trend indicator vs. the S&P 500
is bearish. There is nothing at this point that indicates the top (if we have
indeed made a top) will be significant – we may see a 5-7% drop if that much.
The daily sum of 20 Indicators improved from +1 to +2 (a
positive number is bullish; negatives are bearish). The 10-day smoothed sum
that smooths the daily fluctuations declined from +56 to 52. (These numbers
sometimes change after I post the blog based on data that comes in late.) Most
of these indicators are short-term and many are trend following.
The Long Term NTSM indicator
ensemble switched back to HOLD, 12 Dec. Now, Price is bullish; Sentiment, VIX
& Volume are neutral.
Even while the market
indicators are very bullish, the market remains extremely overbought with the
S&P 500 14.8% above its 200-dMA. If past history follows, that tends to cap
the gains going forward. The downside risk is greater than the upside risk.
I’ll continue to keep a low %
of funds in the stock market until I see a better buying point.
We’ve had 4 down days in a row; we’re due for an up day.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF 15 ETFs (Ranked Daily)
The top ranked ETF receives
100%. The rest are then ranked based on their momentum relative to the leading
ETF.
*For additional background on
the ETF ranking system see NTSM Page at…
http://navigatethestockmarket.blogspot.com/p/exchange-traded-funds-etf-ranking.html
TODAY’S RANKING OF THE DOW 30
STOCKS (Ranked Daily)
Here’s the revised DOW 30 and
its momentum analysis. The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
For more details, see NTSM
Page at…
https://navigatethestockmarket.blogspot.com/p/a-system-for-trading-dow-30-stocks-my_8.html
MONDAY MARKET INTERNALS (NYSE
DATA)
Market Internals remained NEUTRAL on the market.
Market Internals are a decent
trend-following analysis of current market action, but should not be used alone
for short term trading. They are usually right, but they are often late. They are most useful when they diverge from
the Index.
Using the Short-term indicator
in 2018 in SPY would have made a 5% gain instead of a 6% loss for buy-and-hold.
The methodology was Buy on a POSITIVE indication and Sell on a NEGATIVE
indication and stay out until the next POSITIVE indication. The back-test
included 13-buys and 13-sells, or a trade every 2-weeks on average.
My current stock allocation is
about 30% invested in stocks. You may wish to have a higher or lower % invested
in stocks depending on your risk tolerance. 30% is a very conservative position
that I re-evaluate daily.
The markets have not
retested the lows on recent corrections and that has left me under-invested on
the bounces. I will need to put less reliance on retests in the future.
As a retiree, 50% in the stock
market is about fully invested for me – it is a cautious and conservative
number. If I feel very confident, I might go to 60%; if a correction is deep
enough, 80% would not be out of the question.
